How Asia Feels About Money Matters

Underground train passengers are reflected in glass doors as they await a train in Hong Kong on June 22, 2012. The wealth gap in Hong Kong is one of the world’s widest.

Most Asians feel as though they’re poorer than they really are and expect income inequality to climb over the next decade, according to a new survey by Fidelity Worldwide Investment. However, the survey also found that Asians are also generally optimistic about their future, with 90% believing that their children will manage to achieve middle or high income status by dint of good education and hard work.

Those are the findings of a survey commissioned by Fidelity, a global asset management company, which was carried out this spring in ten cities, including Beijing, Shanghai, Mumbai and New Delhi, Hong Kong, Taipei, Singapore, Seoul, Sydney and Tokyo.

Among the 5,186 respondents, a majority of 66% described themselves as middle-class, though they often had difficulty defining what that meant. The survey also found that 86% of Asians have trouble identifying how rich or poor they are relative to others, with 66% of such respondents believing they are relatively poorer than in fact they are.

Fidelity’s Betty Ng, director of Fidelity’s Asia-Pacific investment communications, says that the findings suggest Asians may face challenges in their future investment decisions, causing them to be overly cautious or too quick to embrace risk. For example, she notes, China has “a long history of being a poor country, so some people have a very conservative mindset of wanting to guard their wealth”—a fact that may complicate China’s efforts to boost domestic consumption to drive its economy. While some investors may be overly cautious, she notes that others will tend to swing to the other extreme. “There’s also the possibility that they feel so insecure that they want to make quick bets—quick bets and big bets to catch up with their peers,” she says.

In recent years, Asia’s middle class has boomed, propelling a new wave of consumption across the region. For example, though just 21% of Asia was middle-class in 1990, by 2008, that figure had more than doubled to 56%, according to the Asian Development Bank, as defined by people living on between $2-20 per day. In China, that figure is significantly higher, with data collected by the Chinese Academy of Social Sciences suggesting that the middle class grew from 56% of the population in 1995 to 89% in 2007.

Respondents from region’s two biggest emerging economies, India and China, were particularly upbeat about their prospects. “Indians seem very optimistic about how their income status will change in the next 10 years and how their children will fare,” says Ms. Ng. “Mainland Chinese also tend to have a lot of faith in how they’ll move up economically.”

Fully 81% of respondents in Mumbai said they expected their household income to increase in the next 10 years, a sentiment shared by 75% of those polled in New Delhi. Next on the list of most optimistic cities were Beijing and Shanghai, where 65% and 61% of respondents said they expected their household income to go up in the next decade, respectively.

“They’re hopeful. They seem to feel that the economy will offer them more opportunities,” says Ms. Ng. “These are people who feel they’re in control, that there are things they can do.”

By contrast, more developed economies such as Tokyo and Hong Kong exhibited considerably less buoyancy, with 72% and 61% believing that their household income would stagnate or worsen in the coming 10 years.

The income gap has grown significantly across Asia in the past decade, with the region’s overall Gini coefficient—which captures the degree of wealth inequality—rising to 0.46 in 2010 from 0.33 in 1990. In response to Fidelity’s survey, fully 76% of respondents said that over the coming decade, they expect the wealth gap will only continue to grow.

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